Opinion
No. 23583
8-3-1959
CALIFORNIA CIGARETTE CONCESSIONS, INC., a corporation, Plaintiff and Respondent, v. CITY OF LOS ANGELES, a municipal corporation, Defendant and Appellant. * Civ.
Roger Arnebergh, City Atty., Bourke Jones and James A. Doherty, Asst. City Attys., Los Angeles, for appellant. Irmas & Rutter and William A. Rutter, Beverly Hills, for respondent.
CALIFORNIA CIGARETTE CONCESSIONS, INC., a corporation, Plaintiff and Respondent,
v.
CITY OF LOS ANGELES, a municipal corporation, Defendant and Appellant. *
Rehearing Denied Aug. 28, 1959.
Hearing Granted Sept. 30, 1959.
Roger Arnebergh, City Atty., Bourke Jones and James A. Doherty, Asst. City Attys., Los Angeles, for appellant.
Irmas & Rutter and William A. Rutter, Beverly Hills, for respondent.
FOURT, Justice.
This is an appeal from a judgment in an action brought to recover overpaid license taxes.
The complaint in the action was filed on March 15, 1957. The complaint set forth among other things: that plaintiff was in the business of selling merchandise to the ultimate consumer by means of automatic vending machines placed in various locations in and about Los Angeles County (many of such machines being located in unincorporated areas and many in cities other than as well as in the City of Los Angeles); that about March 8, 1954 the defendant gave plaintiff written notice of a deficiency determination for failure to pay the Los Angeles city license tax for the years 1951 to 1953 in the amount of $756.87, plus a penalty of $19.80; that on or about April 19, 1954 the plaintiff paid the defendant the sum of $756.87 plus $19.80 by virtue of the deficiency assessment; that on or about February 1, 1954 the plaintiff paid the defendant the sum of $830 pursuant to the city license tax ordinance upon demand of the defendant; that said tax was computed on the gross business of plaintiff in the sum of $824,667.44 of which $187,101.09 consisted of gross income from sales made outside the City of Los Angeles; the tax paid on said business from sales outside of the City of Los Angeles was $187; that on or about February 25, 1955 a claim for a refund was filed by plaintiff with defendant requesting payment in the sum of $944.87; that the claim was held pending and under consideration by the defendant until March 4, 1957 at which time defendant orally notified plaintiff that the claim was rejected and refused to pay the demand. The complaint was later amended wherein it was set forth that the plaintiff had from May 25, 1955 and until March 4, 1957 contacted the office of the city clerk, license and sales tax division, and the office of the city attorney of the defendant on times too numerous to mention seeking information as to the disposition of the filed claim; that on each occasion plaintiff was informed that the claim was being held pending a determination by the appellate courts of the cases involving the Belridge Oil Co. and the City of Los Angeles; that the city officials advised plaintiff that the disposition of the plaintiff's claim would be determined by the Supreme Court of California's decision in the Belridge case and that when said decision was rendered the city would take further action on the plaintiff's claim in the present case; that the plaintiff relied upon the statements of the officials and did not file the complaint in the present action awaiting the outcome of the Belridge case and that had it not been for the statements of the officials the plaintiff would have filed the complaint within a few months after the running of the 90 day period following the filing of the claim.
The defendant answered the complaint and amendment. The answer set forth among other things: a copy of the sections of the Municipal Code pertinent to the particular case (among them section 21.65, which sets forth in effect that for every person engaged in operating a coin-operated vending machine a fee of $10 per year for the first $5,000 or less of gross receipts, plus $1 for each additional $1,000 or fractional part thereof, of gross receipts, and further providies that the city clerk shall issue a stamp or label for each machine operated by any licensee which shall be affixed thereto to indicate that the required fee has been paid for each current year and that the license division shall seal the coin opening or slot on each machine not bearing such a label after the penalty for non-payment of the fee has accrued under another section of the code and that it is unlawful to break any seal affixed hereunder without written authorization from the head of the license division). It was then alleged that during the years 1951, 1952, 1953 and 1954 the plaintiff engaged within the City of Los Angeles in the kind of business described in section 21.65 of the code and that it maintained a place of business within the city from which all of its operations within the County of Los Angeles were controlled, managed and directed, that the merchandise sold by the plaintiff was stockpiled in the city before being distributed by persons employed by the plaintiff to the machines (both in and out of the city), and that all of the receipts mentioned in the complaint, and all of the receipts used by the clerk in computing the amount of the tax 'are directly attributable to the business carried on by the plaintiff within the City of Los Angeles', that any cause of action of plainitff is barred by the provisions of subdivision 1 of section 339 of the Code of Civil Procedure. An amendment to the answer was filed wherein it was set forth that on April 13, 1954 the clerk made an assessment against the plaintiff for unpaid license taxes owing to the city from plaintiff for the years 1951, 1952, and 1953 and that all things required by law to be performed were performed, that the plaintiff did not request a hearing but paid the assessment on April 19, 1954.
An agreed statement of facts as to all matters exdepting the affirmative defenses was submitted wherein it was set forth how the plaintiff conducted the business, that contracts were made for placement of the machines with stores, etc., that the machines were serviced by employees of plaintiff who pick up the cigarettes from plaintiff's warehouse in the City of Los Angeles and place them in the machines, collect the money and take it to the Los Angeles office and from there the money is deposited in a Los Angeles bank, that the sales manager's staff and the servicemen are controlled by the general manager who maintains his office in Los Angeles, that many of the machines are located outside the jurisdictional limits of Los Angeles and many are in other cities in Southern California and that many of the other cities impose various types of taxes upon vending machines within their jurisdictional limits and the plaintiff pays such taxes; that on April 19, 1954, pursuant to a notice of deficiency served on plaintiff, the plaintiff paid the City of Los Angeles $756.87 plus $19.80 penalty, which sum represents the license tax paid for 1951, 1952 and 1953 measured by receipts from those vending machines located outside the jurisdictional limits of the City of Los Angeles; that on February 1, 1954 the plaintiff paid the City $187 which sum represents the license tax paid for 1954 as measured by receipts from vending machines located outside the jurisdictional limits of the City of Los Angeles; that the plaintiff, in addition to the above mentioned amounts, paid the city large amounts for taxes for the years 1951, 1952, 1953 and 1954 measured by the gross receipts of the machines within the jurisdictional limits of the City and said amounts are not in dispute.
At the trial there were introduced pursuant to stipulation certain documents, among them the following: a copy of a letter from the city clerk to plaintiff dated April 13, 1954 which advised the plaintiff of the assessment pursuant to section 21.26 of the code and attached thereto a full copy of the sections referred to and a return receipt of the plaintiff showing delivery; a copy of a letter from the plaintiff dated April 19, 1954 to the city wherein there was enclosed a check for $876.60 to the city; a copy of a letter from the city clerk to the city attorney dated April 28, 1954 wherein the city attorney was advised of the receipt of the check for $876.60, totally satisfying the assessment; a copy of a letter dated March 30, 1956 from the plaintiff to a deputy city attorney wherein it is set forth that the plaintiff on February 25, 1955 entered a claim for refund of overpayment of $944.87 for business licenses paid on February 1, 1954 and April 19, 1954, also that on March 9, 1955 it had received a copy of a letter from the city clerk to the finance committee covering the matter and that since that date it had heard nothing and requested that it be advised with reference to what was holding up payment of its claim; a copy of a letter dated April 4, 1956 from the city clerk to the plaintiff wherein reference was made about the letter of plaintiff to the deputy city attorney and it was set forth that 'your claim is based upon points included in the Belridge Oil Company suit. Since final outcome of this case is still undecided, no action can be taken by this office. Upon receipt of a final decision, we will take further action in the matter.'; a copy of a letter from Mr. Provisor as an attorney for the plaintiff to the city clerk dated April 26, 1956 wherein the attorney referred to the clerk's letter of April 4, 1956 and stated that he assumed from the clerk's letter 'that upon the final outcome of the Belridge Oil Company case, you will make a decision as to our claim. I am further assuming that no claim of defense will be made by you for lack of filing suit until that time.'; a copy of a letter dated May 4, 1956 from the city clerk to Provisor as the attorney for the plaintiff wherein reference was made to the letters of April 4 and 26 concerning the claim and also to the assumption by Provisor as to the city's position with respect to the Statute of Limitations, and further it was set forth 'In the event of a Belridge decision adverse to the City upon points which would substantiate the corporation's claim for refund, this office would not recommend a denial of the instant claim because of the running of the Statute of Limitations, but would recommend that the claim be settled in consistency with the decision. With respect to any other aspect of the claim, under provisions of Sec. 363 of the City Charter which deems a claim to have been denied when not acted upon within 90 days, your client would be protected best by the filing of a suit against the City within the statutory period of two years and ninety days from the date of payment.'; and a copy of an office memorandum dated March 1, 1957 wherein it was set forth that Mr. Irmas, the then attorney for the plaintiff, called and inquired regarding the plaintiff's claim for refund and that the clerk told him that the Belridge matter was not completed and was referred to the letter of May 4, 1956 wherein it was stated that his client's best protection would be to file a suit against the city.
The trial judge filed an extensive memorandum opinion and judgment was rendered in favor of the taxpayer, and against the City of Los Angeles. In this appeal, the issues are stated to be: (1) Under all the circumstances, is the Statute of Limitations a valid defense to the action which has been brought? and (2) Under all the circumstances, and in contemplation of law, has there in fact been an overpayment of license taxes for any of the years in question?
Each of the parties concede that the period prescribed for the commencement of an action to recover overpaid license taxes is two years (Code of Civil Procedure, section 339, subd. 1); and each of the parties further concede that this period was tolled for a period of ninety days during which plaintiff was under a statutory prohibition to sue by reason of certain provisions of the Charter of the City of Los Angeles and the Los Angeles Municipal Code (Code of Civil Procedure, section 356).
The prescribed period expired on May 2, 1956 with respect to the $187 and on July 18, 1956 with respect to the $776.67. This action was not commenced until March 15, 1957, and it was not until April 12, 1957 that the final decision in the Belridge case was handed down by the Supreme Court, 48 Cal.2d 320, 309 P.2d 417.
The trial court found 'that the representations made by the defendant to the plaintiff prior to the date in which the Statute of Limitations would have run were relied upon by the plaintiff to their detriment and that the defendant is estopped to plead the Statute of Limitations.' We do not agree with the appellant that it is significant that the original claim on its face mentioned that the problems of the Belridge case were involved, a statement of opinion which obviously was not binding upon the City. In our opinion what is important is that the City Clerk took the position that no action could be taken on these claims for refund until receipt of a final decision in the Belridge Oil Company suit and that the City Clerk represented that further action would be taken in the pending matter upon receipt of a final decision in the Belridge Oil Company suit.
The rule relating to estoppel against the government is well stated in Woodie v. Byram, 132 Cal.App.2d 651, 654, 282 P.2d 920, 922: 'As stated in Farrell v. County of Placer, 23 Cal.2d 624, 627, 145 P.2d 570, 571, 153 A.L.R. 323: 'It has been said generally that a governmental agency may not be estopped by the conduct of its officers or employees (10 Cal.Jur. 650-651), but there are many instances in which an equitable estoppel in fact will run against the government where justice and right require it. (Citation of authorities.) It has been aptly said: 'If we say with Mr. Justice Holmes, 'Men must turn square corners when they deal with the Government,' it is hard to see why the government should not be held to a like standard of rectangular rectitude when dealing with its citizens.' 48 Harv.L.Rev. 1299''.
There is no merit to the contention by appellant that the conditions necessary for an estoppel cannot be found to exist. The true state of the facts insofar as the dates are concerned may have been knowledgeable to each of the parties. However, as a claimant whose matter was being held pending the final decision in the Belridge case, the respondent was ignorant of the true state of the facts insofar as the position which the City would take with respect to the assertion of the defense of the Statute of Limitations. The respondent did all that a reasonably prudent person on inquiry would do to acquire knowledge as to the position which the City would take (see, Marshall v. Benedict, 161 Cal.App.2d 284, 288, 326 P.2d 516); and the respondent was misled to its detriment by the representations made by the Clerk. The trial court's finding of an estoppel is supported by substantial evidence, and it should not be disturbed. Cardosa v. Fireman's Fund Insurance Co., 144 Cal.App.2d 279, 282, 300 P.2d 875.
It is further contended that by failing to request a hearing on the assessment before the Board of Review in the manner provided by former section 21.26 of the License Sales and Use Tax Ordinance, respondent has failed to exhaust its administrative remedy and the assessment became final. It would appear, however, that respondent, by not requesting a hearing as provided by section 21.26, elected not to question the amount of the assessment, and elected to pay the assessment and to file its claim for refund of an overpayment under the claim procedure set forth in section 21.07. By accepting the claim after the time had elapsed for questioning the validity of the assessment in the manner provided in section 21.26, the City should be deemed to have acquiesced in respondent's election to proceed under section 21.07 as an alternative remedy. Certainly, in view of the assurances made by the City that the claim would be considered and acted on only when the Belridge case was finally decided, it would now be unconscionable to regard the administrative remedy provided under former section 21.26 as exclusive. It is not questioned that respondent filed its claims for refund in proper time and on the forms and in the manner prescribed by the City Clerk, all as required pursuant to section 21.07. This case is clearly distinguishable on its facts from the situation presented in Independent Iron Works Inc. v. State Board of Equalization, 167 Cal.App.2d 318, 334 P.2d 236 where the claimant sought recovery of certain penalties under the doctrine of equitable recoupment in a direct action against the board instituted without having first made any attempt to exhaust its administrative remedies.
The merits of the claimed refunds involve the interpretation to be placed upon section 21.65 establishing the amount of the license fee 'for every person engaged in the business of operating, maintaining or letting the use of any coin-operated vending machine for the dispensing of goods, wares or merchandise or other tangible property'. Under the criteria established in City of Los Angeles v. Belridge Oil Co., 48 Cal.2d 320, 309 P.2d 417, the gross receipts of respondent insofar as they pertain to sales made by means of vending machines located outside the City of Los Angeles cannot be regarded as 'directly attributable' to the warehousing and other activities of respondent carried on in the City of Los Angeles.
As a guide to the proper interpretation of a taxing ordinance, it is stated in City of Los Angeles v. Belridge Oil Co., 42 Cal.2d 823, 827, 271 P.2d 5, 8: '* * * where the problem involves the construction of a particular section of a taxing ordinance, the ordinance should be looked to in its entirety and its provisions construed together.' It would clearly be improper for the City Clerk of the City of Los Angeles to issue stamps or labels to be affixed to vending machines located outside the territorial limits of the City of Los Angeles to indicate that a tax to the City of Los Angeles had been paid; and it would clearly be improper for the City Clerk of the City of Los Angeles to seal vending machines located outside the territorial limits of the City of Los Angeles which do not bear such labels. The provisions of section 21.65 pertain to these and other matters, as well as specifying the amount of tax to be imposed on the 'operating, maintaining, or letting the use of any coin-operated vending machine for the dispensing of goods, wares and merchandise.'
To permit a license tax based upon the gross receipts derived from selling activities carried on by the use of vending machines under the provisions of section 21.65 would be an unreasonable discrimination and a denial of equal protection of the law under the rules stated in City of Los Angeles v. Belridge Oil Co., 42 Cal.2d 823, 832, 271 P.2d 5.
The judgment is affirmed.
WHITE, P. J., and LILLIE, J., concur. * Opinion vacated 3 Cal.Rptr. 675, 350 P.2d 715.